Car financing: PCP

XeonSX

Tarambor, from your post it almost sounds like we should all not spend anything on living and keep saving because compound interest is powerful tool to grow your capital. There is no illusion that this car is a luxury that I'm getting only because I think I can. PCP is not a necessity, it just feels better value than other options. I don't just just mean cheaper... I see it worthwhile getting this car for him now than in 1 year's time with cash. The video is a bit silly as it implies never ending cycle of needing a car and never having money to own it. It is very much not my case as I have enough capital now for a deposit and payments for next 3 years. Finance is needed to get the balloon amount. After 3 years I am most likely going to give the car back. I work in central London so car isn't needed. I expect my dad to move to another country then and this car is not the right one for it. Still, 3 years is a long time, I want to keep an option to buy it after.

To answer your question of buying vs renting. With renting you never own it, where as I can if I choose to. If I don't, is it renting for 3 years or buying a car for 3 years? From financial perspective there is no difference as I'll pay similar amount. If you have a problem with wording, let me rephrase: I'd like to get my dad a car by paying for it for at least 3 years, and possibly the whole amount after. Better?

The finance company doesn't generally ask who is the main driver. I'm sure you know people who aren't employed, possibly bringing up children, who are the main driver of a nice shiny new car. Many of them will be on PCP in their partner's name.

They don't ask about the main driver, but they always (I think) make person taking the finance a registered keeper. This has negative insurance costs implications. Insurance companies cater for certain relationships: lease company and you, parents and children (not the other way around though), husband and wife, even employer and you. When I enquired with Direct Line they are happy if my dad was a legal owner and I was registered keeper but they will not even provide cover if I'm a legal owner he is registered keeper. I guess my case is fairly unique and only the very expensive insurers will cater for those edge cases even if the risk if no higher.

And about people getting insurance in various circumstances. I've heard many stories people getting insurance and claiming that they are owners and keepers only to realise that's not the case. In my experience even sales representative who sold lots of cars did not know about importance of these things. I'm not saying all of those people you worked with lied on their finance / insurance applications but it seems likely they either didn't know or didn't want to.
Me, I want to be on the safe side.

Nebulous2

XeonSX wrote: »

And about people getting insurance in various circumstances. I've heard many stories people getting insurance and claiming that they are owners and keepers only to realise that's not the case. In my experience even sales representative who sold lots of cars did not know about importance of these things. I'm not saying all of those people you worked with lied on their finance / insurance applications but it seems likely they either didn't know or didn't want to.
Me, I want to be on the safe side.

You quite simply aren't listening.

My background is in care. Some of these application forms were filled out by me. They were filled out honestly and the insurance companies were fully informed. The cars were bought and owned by people with disabilities who couldn't drive them. The drivers were either family members or paid members of staff.

What I'm saying is that your car can be owned by a finance company, with you being responsible for the loan and being the registered keeper, with your father as the main driver without any difficulty.

A further suggestion is that you take this to the insurance forum or the motoring forum where you will get more specific advice.

I'm out.

Nearlyold

My background is in care. Some of these application forms were filled out by me. They were filled out honestly and the insurance companies were fully informed. The cars were bought and owned by people with disabilities who couldn't drive them. The drivers were either family members or paid members of staff.

Were they Motability vehicles insured through the Motability insurer RSA?

Chriso

Entered into a PCP finance deal with Toyota Financial Services thinking I had a full understanding of the type of contract entered into. My issue is that after six months I decided to repay the outstanding amount to take full ownership of my car. To my horror I found that the amount to be re paid was based on the amount borrowed plus the hire purchase charges which are added up front. This seems reasonable so a borrower understands the full amount that needs to be re paid but surely this does not apply to someone paying back early. In my case I have paid back £1,700 via monthly payments to find my settlement figure is only £700 less than original loan!! I am told this is within the guidelines laid down by FCA.

[Deleted User]

Isn't it simply because interest is higher at the start of any loan, as the capital is higher?

XeonSX

Chriso, I guess £700 could be high or low, depending on the amount borrowed. Could you provide more details on how long was the original term of PCP and how much you borrowed total.

Nearlyold

The interest is not added up front, it's just shown like that for convenience. Chriso will have paid no more than the interest accrued on the reducing debt over 6 months plus up to 58 days interest early settlement charge plus perhaps an option to purchase fee. I would hazard a guess that Chriso like many others who post with the same misunderstanding has assumed the interest is evenly spread over the term - hence his/her horror. Toyota will have followed FCA guidelines as well as adhering to the letter of the early settlement regulations 2004 (as amended to comply with the European Consumer Credit Directive) and as ZX81 succinctly says you pay more interest at the start of the loan term than you do at the end - ALL loans mortgages HP PCP Personal Loan work the same way.

aphill24

Tarambor wrote: »

Those who don't like hearing the truth tend to.


And you don't think you're paying for that? If you don't then you are truly a mug.

My mate just asked what his finance was after 12 months owning a Kuga bought through the Ford Privilege scheme as an employee. Roughly 3k discount over Joe public
Car £19,500
Value after 12 months £13800 trade
Finance owing £15,300
So he is £1500 in negative equity after just 12 months on a 3 yr term
Anyone who is happy to see that kind of depreciation is nut's in my opinion.Please add the 3k extra for non ford employee's
The car sits in the car park for 12 hrs a day and on his drive for 8 hrs when he's in bed, Nice pose though on the 2 mile school run with all the extras

Cornucopia

The nature of the numbers is that a typical PCP scheme will be in negative equity for much of its lifetime. This is because the rate of depreciation is exponential, but the repayments are linear, and they meet at a fixed point 3 or 4 years down the line.



There's a lengthier explanation here, from where that graph originates:-

http://www.thecarexpert.co.uk/settle-a-pcp-early-2/

XeonSX

I don't understand what the deal is... why are people finding this strange or not fair...
Depreciation is always going to be the worst the younger the car is. What PCP and most other loans do is try to minimize the hit and spread out payments as they are easier to pay that way. Instead of paying 400 every month would you prefer if you had to pay 600 in first year, 500 in second year and 300 in third year?